Viability of Gwadar Port: An Indian Perspective

Picture: From Beijing Review - Gwadar Port on Pakistan’s southwestern Makran coast of Balochistan connects the Indian Ocean and the hinterland of Asia

IPCS ARTICLE
Article No. 2089
Gwadar Port : Economic Panacea or A Red Herring
Alok Bansal

Of late, Indian analysts, taking the cue from Pakistani journalists, have started questioning the viability of Gwadar Port. Some have called it a red herring. It is therefore essential to analyse the potential of this port. Situated at the cusp of the Straits of Hormuz, through which nearly 40 percent of the world's oil flows, the port is being completed with financial assistance from China and is being touted as the largest infrastructural project undertaken in Pakistan. The port was set up after the Asian Development Bank's Ports Master Plan studies considered Gwadar to be the ideal location for handling mother ships and large oil tankers to capture the trans-shipment trade of the region and emerge as an alternative to the Persian Gulf Ports. Besides, it provides the shortest route to the sea for the Central Asia countries.

In February 2006, Pakistan approved Dubai Port World, which operates 17 terminals worldwide, as the port operator for Gwadar. The contract was awarded despite severe competition from the Global Marine Service Company. The fact that these two major operators were keen to operate Gwadar indicates its enormous potential. Another significant pointer of its potential is the statement made by Chinese President Hu Jintao during General Musharraf's visit to China when he expressed China's desire to develop Pakistan as an energy corridor via the Gwadar deep sea port. China plans to develop a two lane highway from Gwadar to Gilgit with oil and gas pipe lines and optical fibre running alongside. It also intends to use this port to facilitate exports from Chinese factories located in north-western China. It has accordingly constructed a dry port at Sust, 140 Km North of Gilgit, which was inaugurated by General Musharraf in July. Plans are afoot for a rail link between Pakistan and China by extending the railroad from Tibet to facilitate a faster movement of cargo and tourists between the two countries. There are also plans to set up an oil refinery at Gwadar.

Oman has recently agreed to invest $ 80 million in Gwadar, besides the $ 20 million already invested in the project. Oman had sold 2400 square miles of territory including Gwadar to Pakistan for $ 8.4 million in 1958. Omani investment in Gwadar is not governed by emotions, but a realistic assessment of the economic potential of Gwadar. With a 14.5 metres deep approach channel it will be the deepest port in Pakistan and could berth much larger tankers than either Karachi or Port Bin Qasim. As regards the opening to Central Asia, some analysts consider the Iranian option being superior to Gwadar but the fact remains that Chah Bahar is not a fully functional port and the Chah Bahar - Zaranj - Delaram - Herat - Tirmiz road is still not ready. Till these are operational the access to Central Asia through Iran will continue through Bandar Abbas, which is a much longer route than even the Karachi - Kabul route.

So, if Gwadar has such an enormous potential why do the sceptics doubt its ability to deliver? The fact is that, despite its huge potential, Gwadar cannot attain economic viability till it is connected to Quetta by road or rail, through which it could emerge as a bridgehead to Central Asia. Similarly, as far as China is concerned, its viability depends on timely completion of the Gwadar-Ratodero Motorway. The use of the Makran Coastal highway to transport goods does not make commercial sense because it involves taking goods to Karachi by road which could be done more economically by sea. Thus, Gwadar's potential to become the future trade and energy hub for the growing economies of West, South and East Asia and the landlocked Central Asian Republics lies in cutting down transportation costs and time from Xinjiang province to the port.

However, the most serious impediment to the potential of Gwadar is the continuing insurgency in Balochistan and, to an extent, the violence in Gilgit-Baltistan. As long as this tumultuous situation persists Pakistan cannot emerge as an energy corridor to China nor can a direct road link to Central Asia be established. Not only does violence affect investor confidence, but it also affects the implementation of infrastructural projects, especially the pipelines, roads and rail links, which cannot be perpetually defended. Therefore, Pakistan's handling of discontent in Balochistan and Gilgit-Baltistan will decide the ultimate viability of the Gwadar Port Project. As far as access to Central Asia is concerned Pakistan must move quickly as Chah Bahar is also coming up and it can compete effectively with Gwadar.